Beef, China and TPP are all linked

By Eric Chiou 邱奕宏

Last year Taiwan expressed an interest in joining the Trans-Pacific Partnership (TPP) at the APEC summit in Honolulu. Since then, there has been little public reaction from the TPP’s nine members. That was until last week, when American Institute in Taiwan (AIT) Chairman Raymond Burghardt openly commented on Taiwan’s TPP accession, and linked this issue with the trade dispute over Taiwan’s ban on US beef as well as the suspension of the Trade and Investment Framework Agreement (TIFA) talks between the two countries.

These comments revealed part of the US’ TPP strategy toward Taiwan: Taiwan’s accession hinges on whether it can be “serious about trade liberalization” and the US beef issue will be one of the critical criteria to test Taiwan’s sincerity in opening markets and joining the TPP.

It should not come as a surprise that the US uses TPP accession as a bargaining chip in exchange for Taiwan backing down on the beef issue and the resumption of the TIFA negotiations, since bilateral and multilateral trade negotiations are intertwined and many countries join the TPP for various economic, geopolitical and domestic reasons. For existing TPP members, the decision to accept new members is used to place pressure on their non-TPP trading partners, to facilitate stalled bilateral trade negotiations, or to request further economic concessions.

For example, when Japan announced its intent to join the TPP, members with huge agricultural export sectors, such as the US, Australia and New Zealand, were eager to take the TPP negotiations as an opportunity to force Japan to make substantial concessions on opening its agricultural markets, something that had been a major obstacle in these countries’ individual bilateral free-trade agreement (FTA) negotiations with Japan.

In other words, some countries join the TPP negotiations to boost their economic position and bargaining power.

By joining the TPP, Vietnam intends to promote a US-Vietnam FTA and to seek US recognition of Vietnam as a market economy. For other countries, like Australia, in addition to expecting moderate economic advantage from membership, the major impetus to join the TPP is driven by the strategic consideration of keeping the US engaged in East Asia.

Similarly, the Philippines, which has explicitly expressed its intent to join the TPP, wants to use it to strengthen its strategic alliance with the US to balance China’s assertiveness in the South China Sea.

Interestingly, according to some Japanese academics, Japan also sees the TPP as a step toward lessening its economic dependence on China. Japan’s TPP involvement could further consolidate the US-Japan security alliance.

Some countries also regard the TPP as a window of opportunity to launch vital domestic economic reform and to overhaul uncompetitive industries. For instance, the leadership in Vietnam aims to employ the TPP to boost domestic economic reform and restructure its state-owned enterprises.

Likewise, some Japanese policymakers consider TPP accession a critical opportunity to revamp Japan’s long inefficient agricultural sector and readjust its industrial strategy.

In short, the complexity of the TPP cannot be fully understood from a single economic perspective, but needs to be evaluated from a range of geopolitical, economic and domestic factors.